In Trenton, the end game nears on tax cuts

By Joelle Farrell and INQUIRER STAFF WRITER

Posted: June 19, 2012

TRENTON — As state Senate leaders try behind closed doors this week to reach tax-cut terms with the Republican governor and bring around their skeptical fellow party members, Assembly Democrats are set to continue a kamikaze charge toward the governor's veto pen with a proposed millionaire's tax bill.

After weeks of budget Sturm und Drang that included dueling economic forecasts, an e-mail featuring a picture of flaming trousers, and Gov. Christie prepping for a government shutdown, an eerie quiet settled over Trenton on Friday.

That will change Monday, as the Democratic-dominated Legislature cranks out a budget bill and decides whether to cut taxes, overhaul the state's higher education system, and tackles sundry other measures before July 1, when the session breaks for summer.

Christie, whose national profile has grown, appeared to outmaneuver the Legislature in February, when he proposed a 10 percent income tax cut to be phased in over three years.

But slow economic growth this spring has given Democrats leverage. The state treasurer confirmed Friday that revenue, which missed the mark in March and April, also fell below expectations in May, coming up $36 million short of Christie's projection.

"The revenue intakes in the last few months have given the Democrats the opportunity to keep Christie from getting a big win on this tax-cut issue," said Patrick Murray, a political analyst at Monmouth University. "Whether that actually happens remains to be seen, but it certainly gives them a better bargaining position."

The state's economy is growing, but not as quickly as the Christie administration expected. Treasurer Andrew Sidamon-Eristoff already has recommended tapping several one-shot revenue sources to plug a $676 million shortfall for fiscal 2012, which ends June 30.

And the administration has based its more than $30 billion budget for fiscal 2013 year on revenue growth of 8.6 percent, a figure that the nonpartisan Office of Legislative Services and two Wall Street credit agencies say is unrealistic.

Still, Christie hasn't backed off his certainty about New Jersey's economic recovery.

In recent weeks, his press office has issued dozens of e-mails chiding Democrats for their resistance to his-tax cut plan. One e-mail claimed former President Bill Clinton supported Christie's plan, a false extrapolation. Assembly Democrats responded with a picture of pants engulfed in flames and the caption, "Enough said."

"Given the rhetoric of the last week, it would seem as if the governor has publicly committed to his rosy perspective on the economy, and I don't think there is a whole lot of room in his mind for compromise," said Brigid Harrison, a political science professor at Montclair State University.

Democratic legislative leaders last week appeared to have reached a consensus on what to do with the $183 million that Christie has budgeted for the first year of his income-tax cut: put the money into an escrow fund to be used for property-tax relief, but only when the state economy hits certain revenue benchmarks. Senate Budget Committee Chairman Paul Sarlo (D., Bergen) said he would introduce the budget bill on Thursday, but declined to offer details.

The Assembly went a step farther. It will introduce a bill to increase taxes on those making $1 million or more annually and use the estimated $800 million it generates to fund an existing property-tax relief program, said Assembly Majority Leader Louis Greenwald (D., Camden).

Christie has vetoed the so-called millionaire's tax twice and said he would again.

Although Greenwald said Sen. President Stephen Sweeney (D., Gloucester) planned to introduce a similar millionaire's tax bill in his chamber, a spokesman for Sweeney said only that discussions continued.

The Democratic leadership in neither body has unanimous consent from its caucus, Murray said.

"I think there's a heck of a lot that's still up in the air right now," he said. "[The Assembly] is trying to frame their position as the default position, so it's unraveling an agreement that had already been reached. … It's gamesmanship."

Christie's press office declined to comment Friday on the latest budget plans. Although the governor told his cabinet last week to prepare for a possible government shutdown in the event of a budget stalemate, his office gave no indication whether the Democratic plans offered so far would drive him to that. The last time the state government was shuttered was July 2006.

Pundits doubt it will come to that.

"I don't think it's in either party's best interest to get to that kind of political brinkmanship, particularly coming into an election year," Harrison said. "They don't want to be perceived as that kind of incompetent."

By giving Christie only a sliver of the money he wants for a tax cut (his three-year income tax-cut plan has a total price tag of $1.3 billion), and with strings attached, it may seem Democrats are poking the governor in the eye. But Murray said it might be the best Christie can get. The Governor's Office is negotiating with Senate Democrats to lower the revenue benchmarks tied to the tax cut and also to make the cut automatic once those standards are met, he said.

"The only way he loses is if he doesn't get a tax cut — the details don't matter," he said. "What they're worried about is the mechanism: If he's not guaranteed some kind of tax cut by January, he will be perceived as having lost."

Also in Trenton this week, the Senate Budget and Appropriations Committee hopes to find out Monday the cost of the controversial plan to overhaul state higher education. The Senate Higher Education Committee on Thursday unanimously moved the bill — which would fold much of the University of Medicine and Dentistry of New Jersey into Rutgers University and break off Rutgers-Camden into some sort of collaborative relationship with Rowan University.

Christie wants the bill passed before July 1, but it still awaits hearings in the Assembly and must be posted for a vote in both chambers.

The Assembly Appropriations Committee will consider a bill Monday to divert more nonviolent offenders into drug treatment rather than prison. The bill overwhelmingly passed the Senate earlier this month. Christie has made expanding the state drug court program a top priority this year.

Contact Joelle Farrell at 856-779-3237, jfarrell@phillynews.com, or follow on Twitter at @joellefarrell.